Total net income, which includes adjustments in farmer-owned crop, livestock inventories, plummeted 61% in 2014
Farm income was either way up or way down in 2014, depending on what measure of income is used.
Realized net income of Canadian farmers rose 23 percent to $7.7 billion.
However, total net income plummeted 61 percent to $4.8 billion.
The difference is that total net income is a measure that includes adjustments in farmer-owned inventories of crops and livestock.
“It is really significant in this reporting period because we had that backlog of grain that got held up and couldn’t get shipped out by the railways,” said Ron Bonnett, president of the Canadian Federation of Agriculture.
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In 2013, there was a $6.1 billion increase in inventory because farmers couldn’t move their grain that winter. The following year, inventory value dropped $2.9 billion as the 2013 carryout finally made it to market.
“There has been a distortion just related to the fact there was so much inventory moved,” he said.
Statistics Canada focused on realized net income in its report. It was the fourth time in five years that realized net farm income increased as gains in farm cash receipts outpaced higher operating expenses.
Saskatchewan led the way with $3.2 billion in realized net farm income, followed by Ontario’s $1.3 billion and Alberta’s $1.2 billion. Manitoba posted $799 million in realized net farm income.
Canadian farm cash receipts rose 4.7 percent to $57.8 billion in 2014. That was due in large part to a 19.3 percent increase in livestock revenue to $25.7 billion.
“Lower North American supplies pushed cattle and calf prices higher, contributing to a 44.4 percent increase in receipts. Also boosted by stronger prices, hog revenues rose 25.2 percent,” stated the report.
Crop receipts fell 3.2 percent to $30 billion due to lower grain prices. Canola, flax and lentil receipts bucked the downward trend for all other major grains.
Bonnett said crop receipts would have been far lower if it was not for the unusually large carryout from the 2013 crop.
Government program payments fell 21.8 percent to $2.1 billion due to decreases in crop insurance and provincial stabilization payments.
Total operating expenses increased a modest 2.1 percent to $43.6 billion due to a 47.8 percent increase in livestock purchases and a 6.6 percent increase in interest expenses as farmers added more debt to the balance sheet.
Rising expenses were moderated by lower feed costs and a 15.4 percent decrease in crop and hail insurance premiums in Ontario and the Prairies.
Bonnett said it is clear that the livestock sector and the large grain carryout propped up Canadian agriculture in 2014.
“I think what’s going to be really interesting looking forward to (2015) is what the impact is going to be on the income side with the drop in grain prices,” he said.
His suspicion is that continued strong livestock prices won’t be enough to offset the faltering grain economy in 2015.
The U.S. Department of Agriculture is forecasting that U.S. farm income will drop 38 percent to US $55.9 billion in 2015 due to lower grain and livestock prices.
“We likely won’t have quite as big a hit and one reason for that is the Canadian dollar,” said Bonnett.
“The Canadian dollar has insulted us a little bit on some of the drops.”
However, he believes farm income in Canada will be down somewhat despite sky-high cattle prices in the first part of the year.
Total farm debt increased 6.2 percent to $84.6 billion. Bonnett said that is not an alarming amount but it is something to keep an eye on.
“On an individual farm basis, people are going to have to monitor how sensitive they are to interest rate changes,” he said.
sean.pratt@producer.com
